AGRICULTURE, FORESTRY AND MINING THRIVE BUT WILL FACE MAJOR OBSTACLES

Natural resource industries in the western United States enjoyed a strong recovery in 1987, but the long-term outlook is threatened by significant obstacles, according to a Federal Reserve analysis of economic conditions in the nine western states.

Agriculture, forestry and mining registered gains boosting the economies of many western states last year. However, future performance is clouded by potential government cuts in some agricultural support programs, additional environmental restrictions and uncertainities concerning oil and mineral prices.This assessment is the first of a new series of regional economic reports to be published quarterly by the Federal Reserve Bank of San Francisco. The analysis includes Utah and eight other western states.

"Gains in metal mining boosted employment in Utah, Arizona, Idaho and Nevada," according to the report. "Strengthening oil prices halted the employment slide in Alaska and boosted employment in California. The robust performance of the forest products industry helped to propel the Oregon and Washington economies to strong employment growth."

With the exception of Idaho, where low potato prices depressed income, farmers and ranchers throughout the West enjoyed strong income growth and reduced their debt burdens significantly during the past year, the report said.

While producers in the West receive a smaller-than-average share of government subsidy payments, the elimination of support prices and acreage reduction programs could diminish profits, particularly for cotton, dairy and wheat producers, the report said.

Mining also faces problems because energy-related mining is dependent on unpredictable oil prices. And while other minerals are enjoying high prices, the industry's history suggests that continued strengthening is unlikely.

The report concludes that prices and profits should remain strong over the next year or two, but serious problems facing these natural resource industries threaten to diminish their contribution to total employment and income growth in the West.